This is the "gender pay gap" you hear so much about, and is the
basis of the widely held belief that women are routinely paid
much less than men due to sexism. Unfortunately, that "18%"
number is based on a misunderstanding of the way the statistics
are compiled. The real gender pay gap may only be about 6%, it is
getting smaller over time, and it is mostly not caused by
companies paying women less than men for the same jobs.

Here is the IFS chart:

IFS

The gender pay gap is 18%, and has shrunk from about 27% back in
1993, that chart says.

There are a couple of problems with that statistic, however.
It glosses over a whole range of issues that dramatically alter
how people get paid. The stat measures the gross pay of women
versus men regardless of the work they choose to do, whether they
work overtime or part-time, or take time off from their career to
raise kids.

So the IFS produced this other chart (below), which breaks down
the data to factor out those issues. It shows whether men and
women get paid equally for the same work when they are
in the same positions:

Note, in the column on the far left, that the gross gap in
weekly earnings is 36% — an apparently massive injustice to
women. But that gap is a misinterpretation of the data. Women are
often paid less because they are working fewer hours, the IFS
says. It does not compare like-with-like, which would
show you if women's work was valued less.

The second column compares hourly wage rates across the genders,
and it shows that women apparently earn 19% less than men. But
that still does not compare men and women in similar
situations because part-time work is paid less than full-time
work for both men and women, but women are more
likely to be in part-time work. Similarly, overtime work hours
are paid more than either full-time or part-time work
for men and women, but men tend to work more overtime.

The third column shows the difference in wages among men and
women who work more than 20 hours a week: The gap is now "only"
16%. That is still a pretty large apparent pay injustice. But,
again, it does not account for one of the main factors
in pay differential: Whether you took time out of your career to
raise children.

The fourth column shows there is an only 10% difference between
men and women who work full time and do not have kids,
and the difference shrinks to just 6% (fifth column) among
workers who are "young," aged 22- 35. That "young" column is
interesting because it looks at workers in the same work, for the
same hours, whose careers have not been interrupted by families.
That 6% is the gender pay gap that is plausibly
explained by sexism, and not career choices.

That's a lot smaller than the headlines suggest.

On top of that, the pay gap is shrinking over time. Here is the
gap depending on when you were born:

IFS

This is a really interesting chart because it confirms what
happens to your pay when you take time out of your career to
raise kids. The gap is as low as 5% in your twenties, if you're a
millennial.

Generally, workers begin their maximum earning years in their 40s
and 50s, when they enter management or achieve peak seniority.
This is when the real money gets made! But women take a big hit
if they take time off to have kids. After re-entering the
workforce they arrive at this phase in their careers years behind
their colleagues who never left work.

When people with children enter their 40s and 50s they are
playing catch-up at just the wrong time, from an economics point
of view.

That is why the lines on that chart show the pay gap rising over
time — the people (often men) who do not have kids are
accelerating ahead of the people (often women) who are
parents.

The stats indicate that women can maintain almost all their pay
parity by behaving like men: working full time, working overtime
when they can, and by not leaving work to have children.

Of course, this is easier said than done. The data raise
questions about the economic damage men do to their female
spouses if they want kids but refuse to leave work to raise
them.

Finally, the stats also suggest that the biggest thing companies
could do to address the gap is not to pay women more, but to hire
workers full time (not part-time) and offer on-site, full-time
childcare for all parents at work.